Fitch Ratings: Slowing global demand for Asian exports has weakened the growth outlook for many APAC sovereigns. Fitch Ratings believes this could pressure fiscal accounts and delay fiscal consolidation. In Australia and New Zealand, falling housing prices add to growth challenges from monetary policy rate hikes.

Some sovereigns have shown resilience to the weakening global outlook, with lagged domestic recoveries from the Covid-19 pandemic continuing and a revival in tourism supporting economic activity. Nonetheless, risks to the outlook have also increased for those sovereigns.

The strengthening of the US dollar has several unintended consequences in Asia, including higher yields and a sharp fall in FX reserves, from revaluation and intervention by some central banks. External financing risks have, in particular, increased in ‘frontier markets’ facing currency pressures and loss of external-market access in combination with elevated public debt.

Our new report, What Investors Want to Know: APAC Sovereigns Facing External Headwinds, addresses a range of questions from investors about rising external headwinds for Fitch’s APAC portfolio and the impact on foreign reserves, fiscal consolidation, and the tourism sector. The report explores specific questions around China’s economic outlook, Sri Lanka’s debt crisis, external pressures in Bangladesh and India, fiscal consolidation in Malaysia, implications of rising interest rates in Australia and New Zealand, monetary policy outlook in Japan, and geopolitical risks in Taiwan. The report can be found at www.fitchratings.com or by clicking the link above.